For small-business owners buying or refinancing property
Owning the building your business operates from is a big step. Here is how commercial financing works and what lenders look at.
Commercial mortgages are underwritten differently from home mortgages. Lenders look at the property, the strength of the business or the tenants, and your own financial position. Terms are shorter, down payments are usually larger, and the costs are different. Here is what to expect before you make an offer.
You've started an application.
Saves as you go · No credit check · A licensed mortgage professional follows up
How lenders look at commercial mortgages borrowers
1A commercial mortgage finances property used for business: a shop, office, warehouse, plaza unit, or a mixed-use building with homes above and stores below. Some are owner-occupied, others are held for rent.
2Lenders commonly want a larger down payment than for a home, and they review the business financials, the property and its leases. Rules and limits differ by lender and property type.
3Terms are often shorter than a home mortgage, with amortizations that may be longer than the term, so a balance usually remains at the end and must be renewed or refinanced. Plan for that from day one.
4Expect costs beyond the interest: lender fee, broker fee, appraisal, environmental or building reports, and legal fees. Everything is subject to lender approval.
Get ready
What lenders will ask you for
Government photo ID and ownership details for the business and any guarantors
Business financial statements and tax returns, usually for the last two or three years
Personal tax documents and a statement of your assets and debts
The agreement of purchase and sale, listing details, or the current mortgage statement for a refinance
For rental or mixed-use property, current leases and a rent roll showing tenants and rent
Your options
Which kind of lender fits you
Option 1
Bank or credit union commercial mortgage
Usually the lowest cost, with the strictest review of business financials and a larger down payment.
Option 2
Alternative or private commercial lender
More flexible on the file and the timeline, with higher interest and fees. Best for short-term use with a clear exit.
Option 3
Mixed-use or residential-style financing
Some buildings with a small commercial portion may qualify under residential rules. Lenders decide case by case.
Option 4
Refinance an existing commercial property
Replace your current loan or pull out equity for the business. Check penalties on the current loan first.
Avoid these
Common mistakes
!Making an offer before checking how a lender sees the property. The use, condition and location affect which lenders will consider it.
!Forgetting the extra reports and legal work. Environmental, building and title work can take time and cost money.
!Using up the business cash needed for operating costs on the down payment.
!Assuming the loan renews automatically. Plan how you will repay or refinance when the term ends.
Take action
Your first steps
1Write down the property, the price or value, how the business will use it and any rental income.
2Gather business and personal financials, ID and, for a purchase, the agreement of purchase and sale.
3List what is owed on the business and personally so the full debt picture is clear.
4Start the intake so a broker can compare banks, credit unions and alternative commercial lenders.
5Review the written costs and terms, and get independent legal and accounting advice before you commit.
The intake
What your application will ask
Your online application goes one topic at a time and saves every answer and document as you go, so you can stop and come back. It never runs a credit check, and a licensed mortgage professional reviews it and follows up.
For commercial mortgages borrowers
What type of property is it (retail, office, industrial, mixed-use), where is it, and what is the price or value?
Will your business occupy all or part of it, and is there rental income from tenants?
How long has the business operated, and what can you show for income (financial statements, tax returns)?
How much do you plan to put down, and how will you refinance or repay when the term ends?
Plus the basics everyone answers 13
Your full name, email, mobile number and the best time to call.
The city you live in, and whether you are a Canadian citizen, permanent resident, or other status.
Are you applying alone or with someone else? If with someone, their name and how you are related.
Your goal: buy, refinance, renew, take out equity, or consolidate debt?
The property type (house, condo, multi-unit) and the city it is in.
Will you live in it, rent it out, or both?
The purchase price or estimated value, and your target closing or renewal date.
Your down payment or available equity, and where it comes from (savings, RRSP/FHSA, a gift, sale of another property).
Your approximate yearly household income before tax.
Your monthly debt payments: car loans, credit cards, lines of credit, student loans, support payments.
Your own estimate of your credit score: excellent, good, fair, poor, or not sure.
In the last 7 years, any bankruptcy, consumer proposal, collections, or missed mortgage payments?
May the broker contact you? (A credit check is only ever run later, with your separate written consent.)
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Answers
Questions people ask
How is a commercial mortgage different from a home mortgage?
Lenders review the property and the business, not just your personal income. Down payments are commonly larger, terms are shorter, and fees and reports differ.
How much down payment do I need?
It depends on the lender, the property type and your business. A larger down payment than for a home is common. A broker can give a realistic range once the details are known.
Can I use my business income to qualify?
Often, yes. Lenders review business financial statements and tax returns, and may also look at your personal finances and any guarantee you give.
What does a commercial mortgage cost?
Interest, plus typically a lender fee, a broker fee, an appraisal, other reports and legal costs. Ask for every cost in writing before you commit.
What happens at the end of the term?
Usually the balance is due, so you renew with the same lender, refinance elsewhere or sell. Plan for this before you sign.
Does starting the intake affect my credit?
No. It is only questions. A credit check, if needed, comes later and only with your permission.
General information, not mortgage, legal or tax advice. Lender rules change and every application is reviewed on its own facts. Your application and documents are stored privately and go only to a licensed mortgage professional at Top Mortgages Inc; they are never sold, and no credit check is run without your separate written consent.